The New Luxury Eldorado: Luxury & The Middle Kingdom

20 May 2010|Added Value

Imperial China was on a par with the sumptuousness, sophistication and excess associated with any of the world’s historical elite – Tsars, Sultans, Kings… But the culture of luxury virtually disappeared during the majority of the 20th century.

Political openness and dramatic economic growth – more than 10% annual growth within the last 30 years – have changed the rules.  Deprived of the opportunity to spend by 50 years of communism, Chinese consumers are now poised to take their revenge.  The new middle class accounts for approximately 150 million people in 2010 and is expected to reach 670 million in 2021.  Today’s China represents a new Eldorado for the global luxury market and could eventually rival the giant of luxury goods, the US.

Step 1 – Status and ‘Face’
Economic dynamism and the prosperity generated have created behaviours which are common in the “new” luxury markets:

  • The importance of status and ‘look’: luxury products and brands are an external symbol of achievement and social and financial success.
  • The “high price + known brand = respected luxury” equation: a tendency to focus more on price and appearance than on the intrinsic features of the product; and to go for big luxury brand names that are strongly advertised in the media and known by everyone.
  • The role of ‘face’: gift-giving is an extremely widespread tradition in China, particularly in the business world.  A gift is not only a means of showing respect to the recipient, but also a reflection of the value you ascribe to him. ‘When you sign a contract for several million RMB with your client, it is of the utmost importance to hand it over in a Louis Vuitton bag.’

These features of luxury are still very visible, particularly in the highly commercial South and South-east (Guangzhou, Shenzhen, Fuzhou, Xiamen)

Step 2 – Status and Knowledge
However, it is not the only way to look at luxury.  Along with a lot of other sectors in China, luxury is evolving very rapidly.

  • In the most sophisticated cities such as Shanghai and Beijing, which are open to international influences, a shift from “Status through Show” towards “Status through Know” can be observed.
  • In order to stand out, people increasingly want to show more judgement and knowledge when purchasing luxury goods: they want to know the story behind a ‘house’ and a product; to be able to explain the reasons for its exclusive price.  The pleasure of ownership increases tenfold for them and gives the impression of being cultured, confident and sophisticated.
  • Luxury brands are aware of this shift and of the risks linked to a marketing strategy that would be too superficial and ostentatious. Digital media, loved by the Chinese, are an excellent way of giving more substance to ‘houses’ and brands. Events are also an extremely powerful way to create luxurious experiences to highlight the lifestyle and myth surrounding the product.

Step 3 – What about native Chinese luxury brands?
After considering China as a provider of cheap labour for years, the Western world is now looking enviously at this new consumer society as a powerful source of growth.

However, China is now beginning to develop and export its own brands – and not just making products for other countries and brands – in a variety of sectors, such as fashion, technology, cars, design.  The very same sectors in which Japan has successfully created super premium / luxury brands, e.g. Yoji Yamamoto, Comme Des Garçons, Issey Miyake, Lexus, Infiniti… even without the rich cultural background and know-how associated with European luxury ‘houses’.

In the fashion industry, some luxury ready-to-wear brands such as Shanghai Tang and Liwai already offer a sophisticated Chinese-European fusion. The Swire group is developing some of the most bijou and avant-garde boutique hotels in the world.  Paintings by Chinese artists are being sold for millions of euros around the world. When will we get to see a Chinese Lexus?

Written by Ben Wood, Innovation Director  Added Value France

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